March 28, 2012

In re Celera Corp.: Delaware Certifies Class Even Though Lead Plaintiff Sold Shares

John Grossbauer of Potter Anderson notes: Here is Vice Chancellor Parsons’ opinion in In re Celera Corp., in which he certified a class for settlement purposes and approved the settlement even though the lead plaintiff had sold its shares in the Celera before its merger with a subsidiary of Quest Diagnostics was completed. The Court addressed several issues related to class actions alleging breaches of fiduciary duty, including typicality and adequacy and the effect of the recent United States Supreme Court decision in the case of Wal-Mart Stores, Inc. v. Dukes on certification of classes in such actions. The Court also addressed attorneys’ fees in the context of the settlement presented, which conferred only therapeutic, non-monetary benefits on the proposed class of stockholders, and awarded substantially less than plaintiffs had requested.

The Court was troubled by the stock sale, noting that such a sale creates an appearance of impropriety, which undermines the trust of other shareholders and the Court in the lead plaintiff. Observing that such facts created legitimate criticisms, the Court stated that in the future it might well employ bright-line test declining to certify such holders as class plaintiffs because “Delaware courts have good reason to expect more from those who would serve as lead plaintiffs in representative litigation.”